Chancellor Rishi Sunak has announced a new fast-track finance scheme for SMEs called the Bounce Back Loan scheme. The scheme launches on 4 May and applications will be made via a simple online application. 

What is the Bounce Back Loan scheme?

Small and medium-sized businesses will be able to borrow between £2,000 and £50,000 and access the cash within days under the new Bounce Back Loan scheme announced by the government on 27 April.

Loans will be interest free for the first 12 months and will be for up to six years. The government will provide lenders with a 100% guarantee for the loan and pay any fees and interest for the first 12 months. No repayments will be due during the first 12 months. The government will also work with lenders to agree a low rate of interest for the term of the loan.

The scheme is designed to ensure that small firms who need vital cash injections to keep operating can get finance in a matter of days.

How to apply

The scheme will be delivered through a network of accredited lenders and applications will be made on a simple online form. We expect the accredited lenders to be those listed here, but this will be confirmed by the government once further information is available.

More information about the scheme will be published shortly here.

Is my business eligible to apply for a Bounce Back Loan?

You can apply for a loan if your business:

  • is based in the UK.
  • has been negatively affected by coronavirus.
  • was not an ‘undertaking in difficulty’ on 31 December 2019. Broadly, an ‘undertaking in difficulty’ is one which has accumulated losses equal to or greater than 50% of their subscribed share capital as at 31 December 2019. (A complete definition of an ‘undertaking in difficulty’, which is an EU-defined term, can be found here.)

Some UK companies and commentators have expressed concern that the definition of ‘undertaking in difficulty’ is too restrictive and will block many companies from receiving the government-guaranteed loans they desperately need. As a result, several representative organisations across Europe are said to be lobbying the EU to amend the definition so that more companies can receive loans. We will update this note as and when we hear further on this issue.

If you would like some guidance about whether your business is an ‘undertaking in difficulty’ please contact us.

The scheme is not available to banks, insurers and reinsurers, public-sector bodies or state-funded primary and secondary schools.

You should note that Bounce Back Loans will not be available to businesses already claiming under the Coronavirus Business Interruption Loan Scheme (CBILS), which you can read more about here. However, the government has said that if you’ve already received a loan of up to £50,000 under CBILS and would like to transfer it into the Bounce Back Loan scheme, you can arrange this with your lender until 4 November 2020.

If you would like to discuss applying for a Bounce Back Loan, please call us on 020 7625 4545.

For all latest Coronavirus (Covid-19) updates, please visit our dedicated support page here.  

Warning: The above is merely general guidance and should not be relied upon as formal advice. The advice we give to each client will depend on their specific circumstances. We suggest you take professional advice before taking any action in relation to the issues discussed above.